Buying a new-construction (“on-paper”) apartment in Israel means buying from a developer (kablan) before or during construction. You hire your own lawyer, sign a developer contract, and pay in milestones tied to building progress. Israel’s Sale (Apartments) Law requires every payment beyond a small unprotected slice (about 7% of the price) to be secured by a bank guarantee (arvut bankait) you can redeem if the developer fails. The unpaid balance is usually linked to the Construction Inputs Price Index, so the shekel amount can rise before handover. VAT (18%, since 1 January 2025) is already inside the developer’s quoted price. Keys follow the Tofes 4 occupancy certificate, after which a defects-and-warranty period protects you for years (4 years on moisture and plumbing, then 3 more years of warranty). This page walks the full process step by step, from picking a developer to final registration in the Tabu, and covers the parts buyers most often miss: how the bank guarantee actually works, how index linkage and VAT quietly raise your later payments, and how much cash you need on hand at each milestone. New-build buying is a legal and financial process, so confirm every figure with your own real-estate lawyer before you sign. For the big decision, see new versus second-hand property in Israel; for the general flow, see the Buy Property in Israel hub.
New-build buying at a glance
Buying on paper differs from a resale in three ways: you pay over time instead of at once, your money is protected by statute rather than by your own holdbacks, and the price can drift up with a construction index and the VAT rate before you get keys. Here is the shape of a typical deal.
| Stage | What happens | Buyer’s main protection |
|---|---|---|
| Choose developer and project | Vet the kablan, the permit, and the project stage | Due diligence plus your own lawyer |
| Sign the developer contract | Price, payment schedule, mifrat, delay penalties agreed | Independent lawyer review before signing |
| Staged payments | Pay milestones tied to building progress | Bank guarantee (arvut bankait) per payment |
| Final inspection | Walk-through to list defects (protocol rishoni) | Defects fixed before final payment |
| Tofes 4 and handover | Occupancy certificate issued, keys handed over | No keys without Tofes 4 |
| Registration | Title registered in your name in the Tabu | He’arat azhara (warning note) until then |
One-line definitions: kablan = the developer/contractor building and selling the apartment. Arvut bankait = a bank guarantee that returns your money if the developer fails. Tofes 4 = the municipality’s occupancy certificate, the document that legally allows people to move in. Mifrat techni = the binding technical specification of everything inside the apartment.
If the developer offers financing for the milestone payments, read understanding contractor loans in Israel before signing.
Step 1: Check the developer and their track record
Start with the company, not the show apartment. A new-build deal is a multi-year bet on the developer (kablan) delivering on time and to spec, so research them before you fall for a floor plan. Pin down the developer identity first: the legal entity selling the apartment is usually a registered company, sometimes a single-project subsidiary set up just for this building, and the brand name on the sign is not always the entity on the contract. Get the exact company name and registration number, check it in the Companies Registrar, and confirm that the entity signing your contract is the one that owns the land and holds the permit.
- Past projects: how many, where, and were they completed?
- Delivery history: did earlier buildings hand over on time, or run years late?
- Financial stability: is a bank accompanying the project (a “bank-accompanied” or melaveh project), which is what makes the bank guarantee possible?
- Reputation: search for defect complaints, delay disputes, and how the developer handled them.
A bank-accompanied project is safer because the same bank that finances construction issues your payment guarantees. Ask your lawyer to confirm the accompanying bank before you sign. For the deeper pre-signing due-diligence routine, see how to check building permits before buying in Israel.
Step 2: Confirm the building permit and project stage
Two facts change your risk more than anything in the brochure: whether a valid permit exists, and how far construction has gone.
Permit status
A project can be marketed before a building permit (heter bniya) is issued. Marketing before a permit is legal but riskier: plans, unit mix, and timelines can still shift. Your lawyer should verify the permit is issued for the specific building and matches the unit you are buying.
Project stage
Where the project sits on the timeline changes both price and risk:
- Off-plan (pre-construction): lowest price, longest wait, most uncertainty on delivery date and final spec.
- Under construction: the building is going up, the milestone schedule is live, and delivery is easier to estimate.
- Near completion: least uncertainty, often the highest price, shortest gap to keys.
Earlier stages reward you with price but cost you in time and certainty. Match the stage to your timeline and your tolerance for delay.
Step 3: Hire your own lawyer (not the developer’s)
This is the single most important step, because it is your lawyer’s review before signing that catches everything else. The developer’s lawyer works for the developer. You need your own independent real-estate lawyer to verify the land ownership and permit, read the contract against your interests, and confirm the payment guarantees are real. Lawyer verification is what turns the brochure into facts: your lawyer pulls the Tabu (or Israel Land Authority) extract to confirm the developer actually owns or has rights to the land, cross-checks the building permit against your specific unit, and verifies that the accompanying bank and its guarantees genuinely exist before a shekel moves. Treat that verification as a precondition for paying, not a formality after the deposit.
The developer will usually also charge a separate registration fee for their own lawyer’s work. Under the Sale (Apartments) Law regulations this fee is capped at the lower of 0.5% of the apartment price or ₪5,915 plus VAT (2026 figure, indexed yearly), and the cap applies only where the price is ₪4,642,750 or less; above that the law sets no limit. That developer’s-lawyer fee covers registration only and represents the developer, so it never replaces your own conveyancing lawyer. For how to choose one and what they do, see signing a property contract in Israel and the Israeli real-estate-law paperwork guide.
Step 4: Negotiate and sign the developer contract
Your lawyer negotiates more than the price. The developer contract sets the payment schedule, the technical specification, the delivery date, and what happens if the developer is late.
- Price and what it includes: confirm VAT is inside the quoted figure (it normally is) and what extras sit outside it.
- Payment schedule: milestones tied to real construction progress, not arbitrary calendar dates.
- Delay penalties: the Sale Law sets minimum delay compensation; your lawyer can push for more.
- Index cap: negotiate a cap on the construction-index linkage where possible (see Step 7).
Step 5: How the bank guarantee (arvut bankait) protects your money
Under Israel’s Sale (Apartments) (Assurance of Investments) Law, a developer cannot collect more than a small early slice of the price (about 7% is the unprotected ceiling) unless each further payment is secured for you. The law allows five forms of security; a bank guarantee (arvut bankait) is by far the most common, with insurance second.
For every payment you make, the developer’s accompanying bank issues a guarantee for that amount. If the developer becomes insolvent or fails to deliver, you redeem the guarantee directly from the bank and get your money back.
The one rule that matters: never transfer a payment without receiving the matching guarantee. If a developer asks you to pay into anything other than the project’s designated (trust/escrow) account, or to pay ahead of a guarantee, stop and call your lawyer.
Step 6: Make staged payments and arrange bank financing
You pay in milestones as the building rises, for example on completion of the frame, the exterior walls, and so on. The accompanying bank releases your mortgage funds to the developer by the same progress schedule, so a new-build mortgage works differently from a resale loan: the bank pays out over time, matched to your payment schedule, not in one lump at closing.
Bank of Israel rules cap the mortgage at 75% of value for a first or sole home (about 25% down), 70% for a move-up (replacement) home, and 50% for an investment or additional home. Non-resident and foreign buyers are typically financed around 50%, treated like investment-tier borrowers. The current Bank of Israel base rate is 3.75% (effective 25 May 2026), which puts Prime at 5.25%. Because you pay milestones over years while the bank releases funds by progress, plan the gap between your deposit and completion. Full loan limits and tracks are on the mortgage in Israel guide.
Step 7: Index-linked balances (the bill that quietly grows)
Your unpaid balance is usually linked to the Construction Inputs Price Index (madad teshumot ha-bniya), which tracks the cost of building materials and labor. As the index rises, the shekel amount you still owe rises with it, so the apartment can cost more by handover than the headline price at signing.
Index drift, my estimate: on a ₪3,000,000 apartment where ₪2,400,000 (80%) is still unpaid and linked, a 3% rise in the construction index over the build period adds about ₪72,000 to what you owe. Math: 2,400,000 × 0.03 = 72,000. Basis: an illustrative 3% index move applied only to the linked, unpaid balance; the real figure depends on the actual index and how much you have already paid.
This is why a negotiated index cap, and front-loading payments when sensible, can save real money. Confirm the linkage clause with your lawyer.
Step 8: Review the technical specification (mifrat techni) and upgrade costs
The mifrat techni is the binding list of everything in the apartment: floor tiles, kitchen cabinets, number of electrical outlets, sanitary fittings, and more. Go through it with your lawyer, and an engineer or architect if the project is large, and put every change or upgrade in writing.
Upgrades are a common cost surprise. Developer upgrade pricing (a better kitchen, different flooring, moving a wall) is often well above market, and a vague “to be priced later” line can balloon. Get upgrade prices fixed in the contract or a signed addendum before you sign, not after, when you have lost your leverage.
Upgrade exposure, my estimate: on a typical 4-room apartment, a kitchen upgrade plus better flooring and a few wall and electrical changes commonly runs ₪80,000 to ₪150,000 through the developer. Basis: a mid-range upgrade package at roughly 3% to 5% of a ₪3,000,000 price, priced before signing; budget for it as real cash on top of the headline figure, not an afterthought.
Step 9: Delivery timeline and delay protections
The contract must state a delivery date. Israeli new-builds run late often enough that the Sale Law provides statutory delay compensation: after a short grace period (60 days) past the contractual date, the developer owes you monthly compensation until handover. The compensation is set by formula on the apartment’s rental value and rises if the delay drags on. Enforcement is real but slow, so your lawyer should make the delay clause clear and the compensation automatic rather than something you have to chase.
Our companion piece explains why buyers should treat the off-plan delivery date as a financial risk, not a formality.
Step 10: Final inspection and the Tofes 4 occupancy certificate
Before the final payment you conduct a walk-through (protocol rishoni) to list every defect, from a chipped tile to a leaking joint. Those defects are recorded and must be fixed. Bringing an independent inspector pays for itself here; see property inspection (bedek bayit) in Israel.
Handover and the last payment hinge on the municipality issuing a Tofes 4 (occupancy certificate, teudat gmar), which confirms the building is legally fit to live in. No Tofes 4 means no keys, so do not make the final payment or take possession on a promise that it is “coming.”
Step 11: Defect liability (bedek) and warranty (achrayut)
After handover you are protected for years, in two layers, and these periods cannot be waived or shortened by the contract. Throughout both layers the defect responsibility sits squarely with the developer: by law the developer must fix qualifying construction defects, and what shifts over time is not whether they are responsible but who has to prove the defect’s cause.
- Defect-liability period (tkufat bedek): moisture, sealing, and plumbing defects are covered for 4 years; flooring, cladding, and carpentry for 2 years; many other items for 1 to 2 years. During this period the burden is on the developer to show a defect is not their fault, so defect responsibility effectively defaults to them.
- Warranty period (tkufat achrayut): a further 3 years after the defect-liability period ends. In this stretch the developer is still responsible for genuine construction defects, but the burden shifts to you to show the fault stems from construction.
Document every defect in writing during these windows.
VAT on a new-build apartment
Buying from a developer is a business sale, so VAT applies. A resale between two private individuals carries no VAT at all, which is the single biggest tax difference between the two routes.
When VAT applies and how it sits in the price
VAT applies because the seller (the developer) is a business making a taxable sale. The developer’s quoted price already includes VAT, currently 18% (raised from 17% on 1 January 2025). You do not add VAT on top of the headline figure. In the contract, confirm the price is written as “including VAT” (kolel ma’am) so there is no argument later about whether tax sits inside or outside the number.
The staggered-payment catch and index-linked VAT exposure
Because you pay over time, each staged payment is charged at the VAT rate in force on the date that payment is made. If the VAT rate changes mid-build, later milestones can be charged at the new rate. Worse, VAT is calculated on the index-linked amount, so the two forces compound: a payment that grows with the construction index also carries VAT on the larger figure. Ask your lawyer to spell out in the contract exactly how a VAT-rate change is handled.
Buyer cash planning
Plan your cash around the fact that your real, all-in cost is a moving target until the last milestone clears. My estimate: on a ₪3,000,000 contract that is 80% unpaid (₪2,400,000), a 3% construction-index rise adds about ₪72,000, and a one-point VAT increase on that linked balance adds roughly ₪24,000 more (2,400,000 × 0.01). Combined, that is about ₪96,000 of extra cash beyond the headline price. Basis: illustrative 3% index and one-point VAT moves applied to the linked, unpaid balance only. Keep a buffer for index and VAT drift, not just the deposit and milestones.
How this differs from a second-hand purchase
A resale between private individuals has no VAT on the price, and the price is fixed at signing rather than index-linked. That single difference is one reason new and resale homes budget so differently; see buying a second-hand apartment in Israel and the full new versus second-hand comparison. If you are buying as an overseas buyer, the reduced purchase-tax track is on buying after aliyah (oleh), and the foreign-buyer financing rules are on buying real estate in Israel as a foreigner.
Registration in the Tabu
The final step is registering the apartment in your name in the Land Registry (Tabu). For new builds this often lags years after you move in, because the parcel and building have to be formally subdivided first. Until registration completes, your interest is protected by a he’arat azhara (warning note) that blocks the developer from re-selling or encumbering your unit. Your lawyer manages this process and chases it to completion.
Before you sign or pay: a quick confirm check
- Have you seen, in writing, the building permit for your specific unit and the project’s accompanying bank?
- Is your own independent lawyer (not the developer’s) engaged and has she read the contract?
- Is a bank guarantee being issued for this exact payment before the money leaves your account, into the designated project account only?
- Are the index-linkage clause and the VAT-rate-change wording both spelled out and capped where possible?
- Are all upgrades and their prices fixed in the contract or a signed addendum?
If any answer is “not yet,” do not transfer money. Stop and call your lawyer.
New-construction contract checklist
- Developer vetted: past projects, delivery history, accompanying bank confirmed.
- Building permit verified for your specific unit; project stage understood.
- Your own independent lawyer engaged before signing.
- Bank guarantee (arvut bankait) issued for every payment; nothing paid outside the designated account.
- Payment schedule tied to real construction milestones.
- Index-linkage clause read; cap negotiated where possible.
- Mifrat techni reviewed; all upgrades priced in writing.
- Delivery date and delay-compensation clause confirmed.
- Final walk-through (protocol rishoni) and Tofes 4 before final payment and keys.
- Bedek (4-year moisture/plumbing, 2-year flooring/cladding/carpentry) and 3-year achrayut periods confirmed.
- Registration plan (Tabu plus he’arat azhara) in place.
FAQ
Is buying an apartment on paper safe in Israel?
It is well protected when you follow the law. The Sale (Apartments) Law forces the developer to secure each payment beyond about 7% of the price with a bank guarantee or equivalent. The risk is procedural: paying without the matching guarantee, or skipping an independent lawyer. Get both right and your money is recoverable if the developer fails.
What is the bank guarantee (arvut bankait)?
It is a guarantee the developer’s bank issues to you for each payment you make. If the developer goes bankrupt or fails to deliver, you redeem it from the bank and recover that money. Never transfer a payment before you hold the matching guarantee.
When do I get the keys?
After the municipality issues the Tofes 4 (occupancy certificate), you complete the final walk-through and any defect fixes, and you make the final payment. No Tofes 4 means no keys.
Do I pay VAT on a new-build?
Yes, but it is already inside the developer’s quoted price (currently 18%). You do not add it on top. Each staged payment is charged at the VAT rate in force on its payment date, and on the index-linked amount, so later milestones can be a little higher.
New-build or resale?
New-build means waiting, index-linked balances, and VAT, but a brand-new home with statutory protections. Resale means immediate possession and no VAT, but you inherit the building’s age and condition. See the full new versus second-hand comparison.
How long until the apartment is registered in my name?
Often several years after move-in, because the land and building must be formally subdivided first. A he’arat azhara protects you in the meantime, and your lawyer manages the registration to completion.
Sources
- Sale (Apartments) (Assurance of Investments) Law, 1974 and Sale (Apartments) Law (bank-guarantee requirement, delay compensation, defect and warranty periods): nevo.co.il
- Standards Institution of Israel (SII) and Kol Zchut (defect-liability item periods; developer’s-lawyer registration-fee cap, ₪5,915 / 0.5% for 2026)
- PwC Israel, Other taxes (VAT 18% since 1 January 2025): taxsummaries.pwc.com/israel
- Bank of Israel (base rate 3.75% effective 25 May 2026, Prime 5.25%, LTV caps): boi.org.il
Your one next step
Decide your project stage and budget, then have an independent lawyer vet the developer and the guarantee before you sign anything. Tell the Semerenko Group team what you are looking for and we will help you start the on-paper buying process safely.
